The ABS defines R&D as systematic investigation or experimentation involving innovation or technical risk, the outcome of which is new knowledge, with or without a specific practical application, or new or improved products, processes, materials, devices or services.

Tables 25.2 and 25.3 summarise the latest R&D statistics available. The data show after increasing by 17% in the period 1998-99 to 2000-01, gross expenditure on R&D increased by 18% from $10.4 billion (b) in 2000-01 to $12.8b in 2002-03. With the exception of the state and territories government component which remained the same, all sectors showed an increase in R&D expenditure in 2002-03 compared with 2000-01.

25.2 EXPENDITURE ON R&D

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

Sector

$m

$m

$m

$m

$m

$m

Business

4,094.7

4,136.7

4,982.6

6,191.9

6,571.4

7220.2

Government

Commonwealth

1,179.4

n.a.

1,404.8

n.a.

1,531.3

n.a.

State/territory

863.6

n.a.

951.0

n.a.

950.9

n.a.

Total

2,043.0

n.a.

2,355.8

n.a.

2,482.2

n.a.

Higher education(a)

2,555.1

n.a.

2,789.8

n.a.

3,429.6

n.a.

Private non-profit

225.3

n.a.

289.0

n.a.

359.5

n.a.

Total

8,918.1

n.a.

10,417.1

n.a.

12,842.7

n.a.

(a) Data for the calendar year ending within the financial year shown.

The most commonly used indicator for international comparison purposes is the ratio of expenditure on R&D to gross domestic product (GDP). As table 25.4 shows, in 2002-03 Australia's R&D expenditure was 1.69% of its GDP, ranking it below Sweden (4.27%), Finland (3.46%), Japan (3.12%), Iceland (3.09%), Republic of (South) Korea (2.91%), United States of America (2.67%), Denmark (2.52%), Germany (2.52%), France (2.20%), Belgium (2.17%), Austria (1.93%), Canada (1.91%), the Netherlands (1.89%) and the United Kingdom (1.88%).

In terms of business enterprise R&D, Australia's ratio of R&D expenditure to GDP in 2002-03 (0.87%) is also below the ratios for the industrialised countries referred to earlier.

For government sector R&D as a percentage of GDP, Australia ranks higher. A R&D to GDP ratio of 0.33% places it eighth in the group of Organisation for Economic Co-operation and Development (OECD) member countries, behind Iceland (0.76%), Republic of (South) Korea (0.39%), New Zealand (0.39%), France (0.37%), Finland (0.36%), Germany (0.35%) and Hungary (0.34%). Government sector R&D as a percentage of GDP is much higher for Australia than for the United States of America, Canada or the United Kingdom.

25.4 EXPENDITURE ON R&D AS A PERCENTAGE OF GDP, OECD countries - 2002-03

Business

Government

Higher education

All sectors(a)

Country

%

%

%

%

Sweden(b)

3.32

0.12

0.83

4.27

Finland

2.41

0.36

0.66

3.46

Japan

2.32

0.30

0.43

3.12

Iceland

1.77

0.76

0.50

3.09

Korea

2.18

0.39

0.30

2.91

United States of America

1.87

0.24

0.42

2.67

Denmark(b)

1.75

0.18

0.58

2.52

Germany

1.75

0.35

0.43

2.52

France

1.37

0.37

0.43

2.20

Belgium(b)

1.60

0.13

0.42

2.17

Austria

n.a.

n.a.

n.a.

1.93

Canada

1.05

0.22

0.63

1.91

Netherlands(b)

1.10

0.27

0.51

1.89

United Kingdom

1.26

0.17

0.42

1.88

Australia

0.87

0.33

0.45

1.69

Norway

0.96

0.26

0.45

1.67

Czech Republic

0.79

0.30

0.20

1.30

New Zealand(b)

0.43

0.39

0.36

1.18

Ireland(b)

0.80

0.09

0.26

1.15

Italy(b)

0.55

0.20

0.36

1.11

Spain

0.56

0.16

0.31

1.03

Hungary

0.36

0.34

0.26

1.02

Portugal

0.32

0.18

0.33

0.93

Greece(b)

0.21

0.14

0.29

0.65

Poland

0.13

0.26

0.20

0.59

Slovak Republic

0.37

0.15

0.05

0.58

Mexico(b)

0.12

0.15

0.12

0.39

(a) Includes private non-profit.(b) Data for 2001-02.

Source: OECD 2004.

SOURCE OF FUNDS FOR EXPENDITURE ON R&D

In 2002-03 the business sector funded 49% of all Australian expenditure on R&D. This compares with 44% recorded in 1992-93. The Australian (Commonwealth) Government funded 36% of R&D in 2002-03 (down from 41% in 1992-93) and the state and territory governments funded 6% (down from 9% in 1992-93).

In 2002-03, 90% of funding for R&D carried out by businesses came from the business sector (down from 94% in 1992-93). Commonwealth Government organisations provided 4% of funding for business R&D expenditure in 2002-03.

About 82% of Commonwealth Government sector R&D was funded by Commonwealth Government organisations in 2002-03. The Commonwealth Government proportion of self-funding has fallen from 86% in 1992-93.

About 66% of state government expenditure on R&D was funded by state government organisations in 2002-03. This is significantly lower than a decade earlier, when the proportion was 76%.

About 86% of higher education R&D funding in 2002-03 came from the Commonwealth Government (compared with91% in 1992-93). Business enterprises provided 5% of the funding in 2002-03, up from 3% in 1992-93.

Commonwealth Government organisations funded 29% of the R&D of the private non-profit sector in 2002-03, while the contribution by state governments was 11%.

Tables 25.5 and 25.6 show the data for 2002-03 and 1992-93 respectively.

25.5 EXPENDITURE ON R&D, Source of funds - 2002-03

Commonwealth Government

State government

Businesses

Other Australian(a)

Overseas

Total

Sector

$m

% of total

$m

% of total

$m

% of total

$m

% of total

$m

% of total

$m

Business

248.1

3.8

12.0

0.2

5,937.0

90.4

50.4

0.8

324.0

4.9

6,571.0

Government

Commonwealth

1,255.9

82.0

39.6

2.6

78.0

5.1

123.7

8.1

34.0

2.2

1,531.3

State/territory

67.4

7.1

630.3

66.3

50.3

5.3

189.3

19.9

13.7

1.4

950.9

Total

1,323.3

53.3

669.9

27.0

128.3

5.2

313.0

12.6

47.7

1.9

2,482.2

Higher education(b)

(c)2,937.9

85.7

104.5

3.0

174.1

5.1

98.5

2.9

114.6

3.3

3,429.6

Private non-profit

103.9

28.9

39.8

11.1

31.6

8.8

147.3

41.0

36.9

10.3

359.5

Total

4,613.2

35.9

826.2

6.4

6271.0

48.8

609.2

4.7

523.2

4.1

12,842.7

(a) Includes funds provided via government levies.(b) Data for year 2002.(c) Includes $2,033m of General University funds, the majority of which is funding from the Commonwealth Government.